Exhibit 2
PLAN OF STOCK ISSUANCE
ATLANTIC COAST FEDERAL CORPORATION
Waycross, Georgia
March 12, 2004
PLAN OF STOCK ISSUANCE OF
ATLANTIC COAST FEDERAL CORPORATION
TABLE OF CONTENTS
PAGE
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I. GENERAL................................................................ 1
II. DEFINITIONS............................................................ 2
III. CONDITIONS TO COMPLETION OF STOCK OFFERING............................. 6
IV. STOCK ISSUANCE PROCEDURE............................................... 6
V. STOCK OFFERING......................................................... 7
A. Total Number of Shares and Purchase Price of Common Stock......... 7
B. Subscription Rights............................................... 9
C. Direct Community Offering and Syndicated Community Offering....... 11
D. Additional Limitations Upon Purchases of Shares of Stock
E. Holding Company Common Stock...................................... 12
Restrictions and Other characteristics of Stock Holding Company... 14
F. Exercise of Subscription Rights; Order Forms...................... 15
G. Method of Payment................................................. 16
H. Undelivered, Defective or Late Order Forms; Insufficient Payment.. 17
I. Member in Non-Qualified States or in Foreign Countries............ 18
VI. CHARTER AND BYLAWS OF THE MHC, STOCK HOLDING
COMPANY AND THE ASSOCIATION............................................ 18
VII. STOCK BENEFIT PLANS.................................................... 18
VIII.SECURITIES REGISTRATION AND MARKET MAKING.............................. 19
IX STATUS OF DEPOSIT ACCOUNTS AND LOAN SUBSEQUENT TO
STOCK OFFERING......................................................... 20
X. RESTRICTIONS ON ACQUISITION OF THE STOCK HOLDING
COMPANY AND THE ASSOCIATION............................................ 20
XI. AMENDMENT OR TERMINATION OF PLAN....................................... 20
XII. EXPENSES OF THE STOCK OFFERING......................................... 21
XIII.TAX RULING............................................................. 21
XIV. EXTENSION OF CREDIT FOR PURCHASE OF STOCK.............................. 21
XV. CONVERSION OF MHC TO STOCK FORM........................................ 21
PLAN OF STOCK ISSUANCE
ATLANTIC COAST FEDERAL
Waycross, Georgia
I. GENERAL
On January 1, 2003, Atlantic Coast Federal (the "Association") reorganized
into a mutual holding company structure whereby the Association became a wholly
owned subsidiary of Atlantic Coast Federal Corporation (the "Stock Holding
Company") and the Stock Holding Company became a wholly owned subsidiary of
Atlantic Coast Federal, MHC (the "MHC"). On March 12, 2004, the Boards of
Directors of the Stock Holding Company unanimously adopted this Plan whereby the
Stock Holding Company will conduct a stock offering, in compliance with OTS
regulations, of up to 49.9% of the aggregate total voting stock of the Stock
Holding Company. The Plan provides that non-transferable subscription rights to
purchase Stock Holding Company Common Stock will be offered first to Eligible
Account Holders of record as of the Eligibility Record Date, then to Tax
Qualified Employee Plans and then to Supplemental Eligible Account Holders of
record as of the Supplemental Eligibility Record Date. Concurrently with, at any
time during, or promptly after the Subscription Offering, and on a lowest
priority basis, an opportunity to subscribe may also be offered to the general
public in a Direct Community Offering or a Syndicated Community Offering. The
price of the Common Stock of the Stock Holding Company will be based upon an
independent appraisal of the Association and will reflect its estimated pro
forma market value following the Stock Offering. It is the desire of the Board
of Directors of the Association to attract new capital to the Association in
order to increase its capital position, support future growth and increase the
amount of funds available for residential and other lending. The Association is
also expected to benefit from its management and other personnel having a stock
ownership in its business, since stock ownership is viewed as an effective
performance incentive and a means of attracting, retaining and compensating
management and other personnel.
In connection with the Stock Offering, the Association will apply to the
OTS to have the Stock Holding Company retain up to 50% of the net proceeds of
the Stock Offering, or such other amount as may be determined by the Boards of
Directors of the Association and the Stock Holding Company. The Stock Holding
Company has the power to issue shares of Capital Stock to persons other than the
MHC. However, so long as the MHC is in existence, the MHC will be required to
own at least a majority of the Voting Stock of the Stock Holding Company. The
Stock Holding Company may issue any amount of Non-Voting Stock to persons other
than the MHC. The Stock Holding Company is authorized to undertake one or more
Minority Stock Offerings of less than 50% in the aggregate of the total
outstanding Common Stock of the Stock
Holding Company, and the Stock Holding Company intends to offer for sale up to
49.9% of its Common Stock in the Stock Offering. The Association believes that
capitalization of the MHC and the Stock Holding Company will provide the MHC and
the Stock Holding Company with economic strength separate and apart from the
Association and could facilitate future activities by the MHC and the Stock
Holding Company.
II. DEFINITIONS
Acting in Concert: The term "acting in concert" shall have the same meaning
given it in ss.574.2(c) of the Rules and Regulations of the OTS as reasonably
interpreted solely within the discretion of the Board of Directors of the
Association and the Stock Holding Company.
Actual Subscription Price: The price per share, determined as provided in
Section V of this Plan, at which Stock Holding Company Common Stock will be sold
in the Subscription Offering.
Affiliate: An "affiliate" of, or a Person "affiliated" with, a specified
Person, is a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by or is under common control with,
the Person specified.
Associate: The term "associate," when used to indicate a relationship with
any Person, means (i) any corporation or organization (other than the
Association, the Stock Holding Company or the MHC or a majority-owned subsidiary
of any of them) of which such Person is a director, officer or partner or is,
directly or indirectly, the beneficial owner of ten percent or more of any class
of equity securities, (ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity, and (iii) any relative or spouse of such
Person, or any relative of such spouse, who has the same home as such Person or
who is a Director or Officer of the MHC, the Stock Holding Company or the
Association or any subsidiary of the MHC or the Stock Holding Company or any
Affiliate thereof; and any person acting in concert with any persons or entities
specified in clauses (i) through (iii) above; provided, however, that any
Tax-Qualified or Non-Tax-Qualified Employee Plan shall not be deemed to be an
associate of any Director or Officer of the Stock Holding Company or the
Association, to the extent provided herein. When used to refer to a Person other
than an Officer or Director of the Association, the Association in its sole
discretion may determine the Persons that are Associates of other Persons.
Association: Atlantic Coast Federal.
Capital Stock: Any and all authorized stock of the Stock Holding Company or
the Association.
Common Stock: Common stock, par value $.01 per share, issued by the Stock
Holding Company, pursuant to its stock charter.
Deposit Account: Any withdrawable or repurchasable account or deposit in
the Association including Savings Accounts and demand accounts.
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Direct Community Offering: The offering to the general public of any
unsubscribed shares which may be effected as provided in Section V hereof.
Director: A member of the Board of Directors of the Association and, where
applicable, a member of the Board of Directors of the MHC and the Stock Holding
Company.
Eligibility Record Date: The close of business on December 31, 2002.
Eligible Account Holder: Any Person holding a Qualifying Deposit in the
Association on the Eligibility Record Date.
Employee: A Person who is employed by the Association at the commencement
of the Stock Offering.
ESOP: The Stock Holding Company's employee stock ownership plan.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Independent Appraiser: The appraiser retained by the Association to prepare
an appraisal of the pro forma market value of the Association and the Stock
Holding Company.
Market Maker: A dealer (i.e., any Person who engages directly or indirectly
as agent, broker or principal in the business of offering, buying, selling, or
otherwise dealing or trading in securities issued by another Person) who, with
respect to a particular security, (i) regularly publishes bona fide, competitive
bid and offer quotations in a recognized inter-dealer quotation system; or (ii)
furnishes bona fide competitive bid and offer quotations on request; and (iii)
is ready, willing, and able to effect transactions in reasonable quantities at
his quoted prices with other brokers or dealers.
Maximum Subscription Price: The price per share of Stock Holding Company
Common Stock to be paid initially by subscribers in the Subscription Offering.
Member: Any person holding a Deposit Account in the Association.
MHC: Atlantic Coast Federal, MHC.
Minority Stock Offering: One or more offerings of less than 50% in the
aggregate of the outstanding Common Stock of the Stock Holding Company to
persons other than the MHC.
Minority Stockholder: Any owner of the Stock Holding Company's Common
Stock, other than the MHC.
Non-Tax-Qualified Employee Plan: Any defined benefit plan or defined
contribution plan of the Association or the Stock Holding Company, such as an
Employee stock ownership plan, stock bonus plan, profit-sharing plan or other
plan, which with its related trust does not meet the requirements to be
"qualified" under Section 401 of the Internal Revenue Code.
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Non-Voting Stock: Any capital stock other than Voting Stock.
OTS: Office of Thrift Supervision, Department of the Treasury, and its
successors.
Officer: An executive officer of the MHC, Stock Holding Company or the
Association, including the Chairman of the Board, President, Executive Vice
Presidents, Senior Vice Presidents in charge of principal business functions,
and any person participating in major policy making functions of the
Association.
Order Forms: Forms to be used in the Subscription Offering to exercise
Subscription Rights.
Person: An individual, a corporation, a partnership, an association, a
joint-stock company, a limited liability corporation, a trust, any
unincorporated organization, a government or political subdivision thereof or
any other entity.
Plan: This Plan of Stock Issuance, including any amendment approved as
provided in this Plan.
Qualifying Deposit: The aggregate balance of $50 or more of each Deposit
Account of an Eligible Account Holder as of the Eligibility Record Date or of a
Supplemental Eligible Account Holder as of the Supplemental Eligibility Record
Date.
SAIF: The Savings Association Insurance Fund of the Federal Deposit
Insurance Corporation.
Savings Account: The term "Savings Account" means any withdrawable account
in the Association including a demand account.
SEC: U.S. Securities and Exchange Commission.
Stock Holding Company: The federal stock corporation that is majority owned
by the MHC.
Stock Offering: The offering of Stock Holding Company Common Stock to
persons other than the MHC in a Subscription Offering, and to the extent shares
remain available, in a Direct Community Offering or otherwise.
Subscription Offering: The offering of shares of Stock Holding Company
Common Stock for subscription and purchase pursuant to this Plan.
Subscription Rights: Non-transferable, non-negotiable, personal rights of
the Association's Eligible Account Holders, Tax-Qualified Employee Plans and
Supplemental Eligible Account Holders to subscribe for shares of Stock Holding
Company Common Stock in the Subscription Offering.
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Supplemental Eligibility Record Date: The last day of the calendar quarter
preceding approval of the Plan by the OTS.
Supplemental Eligible Account Holder: Any person holding a Qualifying
Deposit in the Association (other than an Officer or Director and their
Associates) on the Supplemental Eligibility Record Date.
Syndicated Community Offering: The offering for sale by a syndicate of
broker-dealers to the general public of any shares of Stock Holding Company
Common Stock not subscribed for in the Subscription Offering or the Direct
Community Offering, if any.
Syndicated Community Offering Price: The price per share at which any
unsubscribed shares of the Stock Holding Company Common Stock are initially
offered for sale in the Syndicated Community Offering.
Tax-Qualified Employee Plans: Any defined benefit plan or defined
contribution plan of the Association or the Stock Holding Company, such as an
Employee stock ownership plan, stock bonus plan, profit-sharing plan or other
plan, which with its related trust meets the requirements to be "qualified"
under Section 401 of the Internal Revenue Code.
Voting Stock: 1. Common or preferred stock, or similar interests if the
shares by statute, charter or in any manner, entitle the holder to: (i) vote for
or to select Directors of the Association or the Stock Holding Company; and (ii)
vote on or direct the conduct of the operations or other significant policies of
the Association or the Stock Holding Company
2. Notwithstanding anything in paragraph (1) above, preferred stock is not
"Voting Stock" if: (i) voting rights associated with the preferred stock are
limited solely to the type customarily provided by statute with regard to
matters that would significantly and adversely affect the rights or preferences
of the preferred stock, such as the issuance of additional amounts or classes of
senior securities, the modification of the terms of the preferred stock, the
dissolution of the Association or the Stock Holding Company, or the payment of
dividends by the Association or the Stock Holding Company when preferred
dividends are in arrears; (ii) the preferred stock represents an essentially
passive investment or financing device and does not otherwise provide the holder
with control over the issuer; and (iii) the preferred stock does not at the time
entitle the holder, by statute, charter, or otherwise, to select or to vote for
the selection of directors of the Association or the Stock Holding Company.
3. Notwithstanding anything in paragraphs (1) and (2) above, "Voting Stock"
shall be deemed to include preferred stock and other securities that, upon
transfer or otherwise, are convertible into Voting Stock or exercisable to
acquire Voting Stock where the holder of the stock, convertible security or
right to acquire Voting Stock has the preponderant economic risk in the
underlying Voting Stock. Securities immediately convertible into Voting Stock at
the option of the holder without payment of additional consideration shall be
deemed to constitute the Voting Stock into which they are convertible; other
convertible securities and rights to acquire Voting Stock shall not be deemed to
vest the holder with the preponderant economic risk
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in the underlying Voting Stock if the holder has paid less than 50% of the
consideration required to directly acquire the Voting Stock and has no other
economic interest in the underlying Voting Stock.
III. CONDITIONS TO COMPLETION OF STOCK OFFERING
Completion of the Stock Offering is expressly conditioned upon the
following:
A. The Board of Directors shall adopt this Plan by not less than a
majority-vote.
B. The Association will promptly cause an Application for Minority Stock
Issuance to be prepared and filed with the OTS, and a Registration
Statement on Form S-1 to be prepared and filed with the SEC.
C. Approval of the Application for Minority Stock Issuance and the Plan by the
OTS.
D. Satisfaction of all conditions contained in the OTS approval.
IV. STOCK ISSUANCE PROCEDURE
The Stock Holding Company Common Stock will be offered for sale in the
Subscription Offering at the Maximum Subscription Price to Eligible Account
Holders, Tax-Qualified Employee Plans, and to Supplemental Eligible Account
Holders. The Association may, either concurrently with, at any time during, or
promptly after the Subscription Offering, also offer the Stock Holding Company
Stock to and accept subscriptions from other Persons in a Direct Community
Offering or a Syndicated Community Offering; provided that the Association's
Eligible Account Holders, Tax-Qualified Employee Plans, and Supplemental
Eligible Account Holders shall have the priority rights to subscribe for Stock
Holding Company Common Stock as set forth in Section V of this Plan.
The period for the Subscription Offering and Direct Community Offering will
be not less than 20 days nor more than 45 days unless extended by the
Association and the Stock Holding Company. Upon completion of the Subscription
Offering and Direct Community Offering, if any, any unsubscribed shares of Stock
Holding Company Common Stock may be sold through a syndicate of broker-dealers
to selected members of the general public in the Syndicated Community Offering.
If for any reason all of the shares are not sold in the Subscription Offering,
Direct Community Offering, if any, and Syndicated Community Offering, if any,
the Stock Holding Company and the Association will use their best efforts to
obtain other purchasers, subject to OTS approval. Completion of the sale of all
shares of Stock Holding Company Common Stock not sold in the Subscription
Offering is required within 45 days after the offering circular was declared
effective by the OTS unless an extension is approved by the Stock Holding
Company, the Association and the OTS. In connection with such extensions,
subscribers and other purchasers will be permitted to increase, decrease or
rescind their subscriptions or purchase orders to the extent required by the OTS
in approving the extensions. Completion of the sale of all shares of Stock
Holding Company Common Stock is required within 24 months after the date of
approval of the Plan by the OTS.
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V. STOCK OFFERING
A. Total Number of Shares and Purchase Price of Common Stock
The total number of shares of Stock Holding Company Common Stock
to be issued in the Stock Offering will be determined jointly by the
Boards of Directors of the Stock Holding Company and the Association
prior to the commencement of the Subscription Offering, subject to
adjustment if necessitated by market or financial conditions prior to
consummation of the Stock Offering. The total number of shares of
Stock Holding Company Common Stock shall also be subject to increase
in connection with any oversubscriptions in the Subscription Offering
or Direct Community Offering. The total number of shares of Common
Stock that may be issued to persons other than the MHC must be less
than 50% of the issued and outstanding shares of the Stock Holding
Company.
The aggregate price for which all shares of Stock Holding Company
Common Stock to be sold will be based on an independent appraisal of
the estimated total pro forma market value of the Stock Holding
Company and the Association. Such appraisal shall be performed in
accordance with OTS guidelines and will be updated as appropriate as
required by applicable regulations. The appraisal will be made by an
Independent Appraiser experienced in the area of thrift institution
appraisals. The appraisal will include, among other things, an
analysis of the historical and pro forma operating results and net
worth of the Association and a comparison of the Stock Holding
Company, the Association and the Stock Holding Stock Company Common
Stock with comparable thrift institutions and holding companies and
their respective outstanding capital stocks. Based upon the
independent appraisal, the Boards of Directors of the Stock Holding
Company and the Association will jointly fix the Maximum Subscription
Price. The sales price of the Common Stock shall be at a uniform price
determined in accordance with OTS regulations.
If, following completion of the Subscription Offering and Direct
Community Offering, if any, a Syndicated Community Offering is
effected, the Actual Subscription Price for each share of Stock
Holding Company Common Stock will be the same as the Syndicated
Community Offering Price at which unsubscribed shares of Stock Holding
Company Common Stock are initially offered for sale in the Syndicated
Community Offering.
If, upon completion of the Subscription Offering, Direct
Community Offering, if any, and Syndicated Community Offering, if any,
all of the Stock Holding Company Common Stock is subscribed for or
only a limited number of shares remain unsubscribed for, subject to
Part V hereof, the Actual Subscription Price for each share of Stock
Holding Company Common Stock will be determined by dividing the
estimated appraised aggregate pro forma market value
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of the Stock Holding Company and the Association, based on the
independent appraisal as updated upon completion of the Subscription
Offering or other sale of all of the Stock Holding Company Common
Stock, by the total number of shares of Stock Holding Company Common
Stock to be issued by the Stock Holding Company upon completion of the
Stock Offering. Such appraisal will then be expressed in terms of a
specific aggregate dollar amount rather than as a range.
Prior to the commencement of the Stock Offering, an estimated
valuation range will be established, which range may vary within 15%
above to 15% below the midpoint of such range, and up to 15% greater
than the maximum of such range, as determined by the Board of
Directors at the time of the Stock Offering and consistent with OTS
regulations. The Stock Holding Company intends to issue up to 49.9% of
its common stock in the Offering. The number of shares of Common Stock
to be issued and the ownership interest of the MHC may be increased or
decreased by the Stock Holding Company, taking into consideration any
change in the independent valuation and other factors, at the
discretion of the Board of Directors of the Association and the Stock
Holding Company.
Based upon the independent valuation as updated prior to the
commencement of the Stock Offering, the Board of Directors may
establish the minimum ownership percentage applicable to the Stock
Offering, may fix the ownership percentage of the Minority
Stockholders, or may establish the minimum and maximum aggregate
dollar amount of shares to be sold. In the event the ownership
percentage of the Minority Stockholders is not fixed in the Stock
Offering, the minority ownership percentage (the "Minority Ownership
Percentage") will be determined as follows: (a) the product of (x) the
total number of shares of Common Stock issued by the Stock Holding
Company and (y) the purchase price per share divided by (b) the
estimated aggregate pro forma market value of the Association and the
Stock Holding Company immediately after the Stock Offering as
determined by the Independent Appraiser, expressed in terms of a
specific aggregate dollar amount rather than as a range, upon the
closing of the Stock Offering or sale of all the Common Stock.
Notwithstanding the foregoing, no sale of Common Stock may be
consummated unless, prior to such consummation, the Independent
Appraiser confirms to the Stock Holding Company, the Association and
to the OTS that, to the best knowledge of the Independent Appraiser,
nothing of a material nature has occurred which, taking into account
all relevant factors, would cause the Independent Appraiser to
conclude that the aggregate value of the Common Stock to be issued is
incompatible with its estimate of the aggregate consolidated pro forma
market value of the Stock Holding Company and the Association. If such
confirmation is not received, the Stock Holding Company may cancel the
Stock Offering, extend the Stock Offering and establish a new
estimated valuation range and/or estimated price range, extend, reopen
or hold a new Stock Offering or take such other action as the OTS may
permit.
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The estimated market value of the Stock Holding Company and the
Association shall be determined for such purpose by an Independent
Appraiser on the basis of such appropriate factors as are not
inconsistent with OTS regulations. The Common Stock to be issued in
the Stock Offering shall be fully paid and nonassessable.
If there is a Direct Community Offering or Syndicated Community
Offering of shares of Common Stock not subscribed for in the
Subscription Offering, the price per share at which the Common Stock
is sold in such Direct Community Offering or Syndicated Community
Offering shall be equal to the purchase price per share at which the
Common Stock is sold to Persons in the Subscription Offering. Shares
sold in the Direct Community Offering or Syndicated Community Offering
will be subject to the same limitations as shares sold in the
Subscription Offering.
B. Subscription Rights
Non-transferable Subscription Rights to purchase Stock Holding Company
Stock will be issued without payment therefor to Eligible Account Holders,
Tax-Qualified Employee Plans and Supplemental Eligible Account Holders of
the Association as set forth below.
1. Preference Category No. 1: Eligible Account Holders
Each Eligible Account Holder shall receive non-transferable
Subscription Rights to subscribe for shares of Stock Holding Company
Common Stock in an amount equal to the greater of $500,000, or
one-tenth of one percent (.10%) of the total offering of shares, or 15
times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Stock Holding Company Common
Stock to be issued by a fraction of which the numerator is the amount
of the Qualifying Deposit of the Eligible Account Holder and the
denominator is the total amount of Qualifying Deposits of all Eligible
Account Holders in the Association in each case on the Eligibility
Record Date.
If sufficient shares are not available, shares shall be allocated
first to permit each subscribing Eligible Account Holder to purchase
to the extent possible 100 shares, and thereafter among each
subscribing Eligible Account Holder pro rata in the same proportion
that his Qualifying Deposit bears to the total Qualifying Deposits of
all subscribing Eligible Account Holders whose subscriptions remain
unsatisfied.
Non-transferable Subscription Rights to purchase Stock Holding
Company Common Stock received by Directors and Officers of the
Association and their Associates, based on their increased deposits in
the
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Association in the one-year period preceding the Eligibility Record
Date, shall be subordinated to all other subscriptions involving the
exercise of non-transferable Subscription Rights of Eligible Account
Holders.
2. Preference Category No. 2 : Tax-Qualified Employee Plans
Each Tax-Qualified Employee Plan shall be entitled to receive
non-transferable Subscription Rights to purchase up to 10% of the
shares of Stock Holding Company Common Stock, provided that singly or
in the aggregate such plans (other than that portion of such plans
which is self-directed) shall not purchase more than 10% of the shares
of the Stock Holding Company Common Stock. Subscription Rights
received pursuant to this Category shall be subordinated to all
Subscription Rights received by Eligible Account Holders to purchase
shares pursuant to Category No. 1; provided, however, that
notwithstanding any other provision of this Plan to the contrary, the
Tax-Qualified Employee Plans shall have a first priority Subscription
Right to the extent that the total number of shares of Stock Holding
Company Common Stock sold in the Stock Offering exceeds the maximum of
the estimated valuation range as set forth in the subscription
prospectus.
3. Preference Category No. 3: Supplemental Eligible Account Holders
Each Supplemental Eligible Account Holder shall receive
non-transferable Subscription Rights to subscribe for shares of Stock
Holding Company Common Stock in an amount equal to the greater of
$500,000, or one-tenth of one percent (.10%) of the total offering of
Stock Holding Company Common Stock, or 15 times the product (rounded
down to the next whole number) obtained by multiplying the total
number of shares of Stock Holding Company Stock to be issued by a
fraction of which the numerator is the amount of the Qualifying
Deposit of the Supplemental Eligible Account Holder and the
denominator is the total amount of Qualifying Deposits of all
Supplemental Eligible Account Holders in the Association in each case
on the Supplemental Eligibility Record Date.
Subscription Rights received pursuant to this Category shall be
subordinated to all Subscription Rights received by Eligible Account
Holders and Tax-Qualified Employee Plans pursuant to Category Numbers
1 and 2 above.
Any non-transferable Subscription Rights to purchase shares
received by an Eligible Account Holder in accordance with Category No.
1 shall reduce to the extent thereof the Subscription Rights to be
distributed to such person pursuant to this Category.
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In the event of an oversubscription for shares under this
Category, the shares available shall be allocated first to permit each
subscribing Supplemental Eligible Account Holder, to the extent
possible, to purchase a number of shares sufficient to make his total
allocation (including the number of shares, if any, allocated in
accordance with Category No. 1) equal to 100 shares, and thereafter
among each subscribing Supplemental Eligible Account Holder pro rata
in the same proportion that his Qualifying Deposit bears to the total
Qualifying Deposits of all subscribing Supplemental Eligible Account
Holders whose subscriptions remain unsatisfied.
C. Direct Community Offering and Syndicated Community Offering
1. Any shares of Stock Holding Company Common Stock not subscribed
for in the Subscription Offering may be offered for sale in a
Direct Community Offering. This may involve an offering of all
unsubscribed shares directly to the general public with a
preference to those natural Persons residing in the counties in
which the Association has an office. The Direct Community
Offering, if any, shall be for a period of not less than 20 days
nor more than 45 days unless extended by the Stock Holding
Company and the Association, and shall commence concurrently
with, during or promptly after the Subscription Offering. The
purchase price per share to the general public in a Direct
Community Offering shall be the same as the actual subscription
price. The Stock Holding Company and the Association may use an
investment banking firm or firms on a best efforts basis to sell
the unsubscribed shares in the Subscription and Direct Community
Offering. The Stock Holding Company and the Association may pay a
commission or other fee to such investment banking firm or firms
as to the shares sold by such firm or firms in the Subscription
and Direct Community Offering and may also reimburse such firm or
firms for expenses incurred in connection with the sale. The
Stock Holding Company Common Stock will be offered and sold in
the Direct Community Offering, if any, in accordance with OTS
regulations, so as to achieve the widest distribution of the
Stock Holding Company Common Stock. No Person may subscribe for
or purchase more than $500,000 of Stock Holding Company Common
Stock in the Direct Community Offering, if any. Further, the
Association may limit total subscriptions under this Section
V.C.1 so as to assure that the number of shares available for the
Syndicated Community Offering may be up to a specified percentage
of the number of shares of Stock Holding Company Common Stock.
Finally, the Association may reserve shares offered in the Direct
Community Offering for sales to institutional investors.
Orders received in the Direct Community Offering and Syndicated
Community Offering shall be filled up to a maximum of 2% of the
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Common Stock and thereafter remaining shares shall be allocated
on an equal number of shares basis per order until all orders
have been filled.
The Association and the Stock Holding Company, in their sole
discretion, may reject subscriptions, in whole or in part,
received from any Person under this Section V.C.1. Further, the
Association and the Stock Holding Company may, at their sole
discretion, elect to forego a Direct Community Offering and
instead effect a Syndicated Community Offering as described
below.
2. Any shares of Stock Holding Company Common Stock not sold in the
Subscription Offering or in the Direct Community Offering, if
any, may then be sold through the syndicate of broker-dealers to
members of the general public in the Syndicated Community
Offering. It is expected that the Syndicated Community Offering
will commence as soon as practicable after termination of the
Subscription Offering and the Direct Community Offering, if any.
The Association and the Stock Holding Company, in their sole
discretion, may reject any subscription, in whole or in part,
received in the Syndicated Community Offering. The Syndicated
Community Offering shall be completed within 45 days after the
termination of the Subscription Offering, unless such period is
extended as provided in Section IV hereof. No person may purchase
more than $500,000 of Holding Company Common Stock in the
Syndicated Community Offering, if any.
3. If for any reason any shares remain unsold after the Subscription
Offering, Direct Community Offering, if any, and Syndicated
Community Offering, if any, the Boards of Directors of the Stock
Holding Company and the Association will seek to make other
arrangements for the sale of the remaining shares of Stock
Holding Company Common Stock. Such other arrangements will be
subject to the approval of the OTS and to compliance with
applicable securities laws.
D. Additional Limitations Upon Purchases of Shares of Stock Holding
Company Common Stock
The following additional limitations shall be imposed on all purchases
of Stock Holding Company Common Stock in the Stock Offering:
1. No Person, by himself or herself, or with an Associate or group
of Persons acting in concert, may subscribe for or purchase in
the Stock Offering a number of shares of Stock Holding Company
Common Stock which exceeds an amount of shares equal to more than
$500,000 of Stock Holding Company Common Stock issued in the
Stock Offering. For purposes of this paragraph, an Associate of a
Person does not include a Tax-Qualified or Non-Tax Qualified
Employee Plan in which the Person
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has a substantial beneficial interest or serves as a trustee or
in a similar fiduciary capacity. Moreover, for purposes of this
paragraph, shares held by one or more Tax-Qualified or Non-Tax
Qualified Employee Plans attributed to a Person shall not be
aggregated with shares purchased directly by or otherwise
attributable to that Person.
2. Directors and Officers and their Associates may not purchase in
all categories in the Stock Offering an aggregate of more than
27% of the Stock Holding Company Common Stock issued in the Stock
Offering or 27% of the stockholders' equity held by persons other
than the MHC. For purposes of this paragraph, an Associate of a
Person does not include any Tax-Qualified Employee Plan.
Moreover, any shares attributable to the Officers and Directors
and their Associates, but held by one or more Tax-Qualified
Employee Plans shall not be included in calculating the number of
shares which may be purchased under the limitation in this
paragraph.
3. The minimum number of shares of Stock Holding Company Common
Stock that may be purchased by any Person in the Stock Offering
is 25 shares, provided sufficient shares are available.
4. The aggregate amount of all Common Stock issued in the Stock
Offering by all stock benefits plans, other than the ESOP, shall
not exceed 25% of the outstanding Common Stock held by persons
other than the MHC.
5. The Boards of Directors of the Stock Holding Company and the
Association may, in their sole discretion, increase the maximum
purchase limitation referred to in paragraph 1 of this subpart D,
up to 9.99% of the Common Stock, provided that orders for shares
exceeding 5% of the Stock Holding Company Common Stock offered in
the Stock Offering shall not exceed, in the aggregate, 10% of the
Stock Holding Company Common Stock being offered in the Stock
Offering. Requests to purchase additional shares of Holding
Company Common Stock under this provision will be allocated by
the Boards of Directors on a pro rata basis giving priority in
accordance with the priority rights set forth in this Section V.
Depending upon market and financial conditions, the Boards of
Directors of the Stock Holding Company and the Association, with the
approval of the OTS, may increase or decrease any of the above
purchase limitations.
For purposes of this Section V, the Directors of the Stock
Holding Company and the Association shall not be deemed to be
Associates or a group acting in concert solely as a result of their
serving in such capacities.
Each Person purchasing Stock Holding Company Common Stock in the
Stock Offering shall be deemed to confirm that such purchase does not
conflict
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with the above purchase limitations. All questions concerning whether
any persons are Associates or a group acting in concert or whether any
purchase conflicts with the purchase limitations in this Plan or
otherwise violates any provision of this Plan shall be determined by
the Stock Holding Company and the Association in their sole
discretion. Such determination shall be conclusive and binding on all
Persons and the Stock Holding Company or the Association may take any
remedial action, including without limitation rejecting the purchase
or referring the matter to the OTS for action, as in its sole
discretion the Association may deem appropriate.
E. Restrictions and Other Characteristics of Stock Holding Company Common
Stock
1. Transferability. Stock Holding Company Stock purchased by Persons
other than Directors and Officers of the Stock Holding Company or
the Association will be transferable without restriction. Shares
purchased by Directors or Officers shall not be sold or otherwise
disposed of for value for a period of one year from the date of
the completion of the Stock Offering, except for any disposition
of such shares (i) following the death of the original purchaser,
or (ii) resulting from an exchange of securities in a merger or
acquisition approved by the applicable regulatory authorities.
Any transfers that could result in a change in control of the
Association or the Stock Holding Company or result in the
ownership by any Person or group acting in concert of more than
10% of any class of the Association's or the Stock Holding
Company's equity securities are subject to the prior approval of
the OTS.
The certificates representing shares of Stock Holding Company
Common Stock issued to Directors and Officers shall bear a legend
giving appropriate notice of the one-year holding period
restriction. Appropriate instructions shall be given to the
transfer agent for such stock with respect to the applicable
restrictions relating to the transfer of restricted stock. Any
shares of Common Stock of the Stock Holding Company subsequently
issued as a stock dividend, stock split, or otherwise, with
respect to any such restricted stock, shall be subject to the
same holding period restrictions for Stock Holding Company or
Association Directors and Officers as may be then applicable to
such restricted stock.
No Director or Officer of the Stock Holding Company or of the
Association, or Associate of such a Director or Officer, shall
purchase any outstanding shares of capital stock of the Stock
Holding Company for a period of three years following the Stock
Offering without the prior written approval of the OTS, except
through a broker or dealer registered with the SEC. Such
restrictions shall not apply to (i) "negotiated transactions"
involving more than one percent of the then-outstanding shares of
common stock of the Stock Holding Company or (ii) purchases of
stock made by and held by any Tax-Qualified or Non-Tax Qualified
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Employee Plan of the Association or the Stock Holding Company
even if such stock is attributed to Directors and Officers of the
Association.
2. Repurchase and Dividend Rights. Any cash dividend by the
Association or stock repurchase by the Stock Holding Company
will, to the extent required, be made in accordance with OTS
regulations and policies as in effect at the time of such cash
dividends or stock repurchase. Subject to the approval of the
OTS, the MHC may wave its right to receive dividends declared by
the Stock Holding Company or the Association.
F. Exercise of Subscription Rights; Order Forms
1. As soon as practicable after the prospectus has been approved by
the OTS and declared effective by the SEC, Order Forms shall be
distributed to each Eligible Account Holder, Tax Qualified
Employee Plan and Supplemental Eligible Account Holder at their
last known address shown on the records of the Association. Each
Order Form will be preceded or accompanied by a prospectus
describing the Stock Holding Company and the Association and the
shares of Stock Holding Company Common Stock being offered for
subscription and containing all other information required by the
OTS or the SEC or necessary to enable Persons to make informed
investment decisions regarding the purchase of Stock Holding
Company Common Stock.
2. The Order Forms (or accompanying instructions) used for the
Subscription Offering will contain, among other things, the
following:
(i) A clear and intelligible explanation of the Subscription
Rights granted under the Plan to Eligible Account Holders,
Tax-Qualified Employee Plans and Supplemental Eligible
Account Holders;
(ii) A specified expiration date by which Order Forms must be
returned to and actually received by the Association or
its representative for purposes of exercising Subscription
Rights, which date will be not less than 20 days after the
Order Forms are mailed by the Association;
(iii) The Maximum Subscription Price to be paid for each share
subscribed for when the Order Form is returned;
(iv) A statement that 25 shares is the minimum number of shares
of Stock Holding Company Common Stock that may be
subscribed for under the Plan;
(v) A specifically designated blank space for indicating the
number of shares being subscribed for;
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(vi) A set of detailed instructions as to how to complete the
Order Form including a statement as to the available
alternative methods of payment for the shares being
subscribed for;
(vii) Specifically designated blank spaces for dating and
signing the Order Form;
(viii) An acknowledgment that the subscriber has received the
subscription prospectus;
(ix) A statement of the consequences of failing to properly
complete and return the Order Form, including a statement
that the Subscription Rights will expire on the expiration
date specified on the Order Form unless such expiration
date is extended by the Stock Holding Company and the
Association, and that the Subscription Rights may be
exercised only by delivering the Order Form, properly
completed and executed, to the Association or its
representative by the expiration date, together with
required payment of the Maximum Subscription Price for all
shares of Stock Holding Company Common Stock subscribed
for;
(x) A statement that the Subscription Rights are
non-transferable and that all shares of Stock Holding
Company Common Stock subscribed for upon exercise of
Subscription Rights must be purchased on behalf of the
Person exercising the Subscription Rights for his own
account; and
(xi) A statement that, after receipt by the Association or its
representative, a subscription may not be modified,
withdrawn or canceled without the consent of the
Association.
G. Method of Payment
Payment for all shares of Stock Holding Company Common Stock
subscribed for must accompany all completed Order Forms. Payment may be
made in by check or money order, or, if the subscriber has a Deposit
Account in the Association (including a certificate of deposit), the
subscriber may authorize the Association to charge the subscriber's Deposit
Account.
If a subscriber authorizes the Association to charge his or her
Deposit Account, the funds will continue to earn interest, but may not be
used by the subscriber until all Stock Holding Company Common Stock has
been sold or the Plan is terminated, whichever is earlier. The Association
will allow subscribers to purchase shares by withdrawing funds from
certificate accounts without the assessment of early withdrawal penalties
with the exception of prepaid interest in the form of promotional gifts. In
the
16
case of early withdrawal of only a portion of such account, the certificate
evidencing such account shall be canceled if the remaining balance of the
account is less than the applicable minimum balance requirement, in which
event the remaining balance will earn interest at the passbook rate. This
waiver of the early withdrawal penalty is applicable only to withdrawals
made in connection with the purchase of Stock Holding Company Common Stock
under the Plan. Interest will also be paid, at not less than the
then-current passbook rate, on all orders paid by check or money order,
from the date payment is received until consummation of the Stock Offering.
Payments made by check or money order will be placed by the Association in
an escrow or other account established specifically for this purpose.
In the event of an unfilled amount of any subscription order, the
Association will make an appropriate refund or cancel an appropriate
portion of the related withdrawal authorization, after consummation of the
Stock Offering, including any difference between the Maximum Subscription
Price and the Actual Subscription Price (unless subscribers are afforded
the right to apply such difference to the purchase of additional whole
shares). If for any reason the Stock Offering is not consummated,
purchasers will have refunded to them all payments made and all withdrawal
authorizations will be canceled in the case of subscription payments
authorized from Deposit Accounts at the Association.
If any Tax-Qualified Employee Plans or Non-Tax-Qualified Employee
Plans subscribe for shares during the Subscription Offering, such plans
will not be required to pay for the shares subscribed for at the time they
subscribe, but may pay for such shares of Stock Holding Company Common
Stock subscribed for upon consummation of the Stock Offering. In the event
that, after the completion of the Subscription Offering, the amount of
shares to be issued is increased above the maximum of the appraisal range
included in the subscription prospectus, the Tax Qualified and Non-Tax
Qualified Employee Plans shall be entitled to increase their subscriptions
by a percentage equal to the percentage increase in the amount of shares to
be issued above the maximum of the appraisal range provided that such
subscriptions shall continue to be subject to applicable purchase limits
and stock allocation procedures.
H. Undelivered, Defective or Late Order Forms; Insufficient Payment
The Boards of Directors of the Stock Holding Company and the
Association shall have the absolute right, in their sole discretion, to
reject any Order Form, including but not limited to, any Order Forms which
(i) are not delivered or are returned by the United States Postal Service
(or the addressee cannot be located); (ii) are not received back by the
Association or its representative, or are received after the expiration
date specified thereon; (iii) are defectively completed or executed; (iv)
are not accompanied by the total required payment for the shares of Stock
Holding Company Common Stock subscribed for (including cases in which the
subscribers' Deposit Accounts or certificate accounts are insufficient to
cover the authorized withdrawal for the required payment); or (v) are
submitted by or on behalf of a Person whose representations the Boards of
Directors of the Stock Holding Company and the Association believe to be
false or who they
17
otherwise believe, either alone or acting in concert with others, is
violating, evading or circumventing, or intends to violate, evade or
circumvent, the terms and conditions of the Plan. In such event, the
Subscription Rights of the Person to whom such rights have been granted
will not be honored and will be treated as though such Person failed to
return the completed Order Form within the time period specified therein.
The Association may, but will not be required to, waive any irregularity
relating to any Order Form or require submission of corrected Order Forms
or the remittance of full payment for subscribed shares by such date as the
Association may specify. The interpretation of the Stock Holding Company
and the Association of the terms and conditions of the Plan and of the
proper completion of the Order Form will be final, subject to the authority
of the OTS.
I. Member in Non-Qualified States or in Foreign Countries
The Stock Holding Company and the Association will make reasonable
efforts to comply with the securities laws of all states in the United
States in which Persons entitled to subscribe for Stock Holding Company
Common Stock pursuant to the Plan reside. However, no shares will be
offered or sold under the Plan to any such Person who (1) resides in a
foreign country or (2) resides in a state of the United States in which a
small number of Persons otherwise eligible to subscribe for shares under
the Plan reside or as to which the Stock Holding Company and the
Association determine that compliance with the securities laws of such
state would be impracticable for reasons of cost or otherwise, including,
but not limited to, a requirement that the Stock Holding Company or the
Association or any of their Officers, Directors or Employees register,
under the securities laws of such state, as a broker, dealer, salesman or
agent. No payments will be made in lieu of the granting of Subscription
Rights to any such Person.
VI. CHARTER AND BYLAWS OF THE MHC, STOCK HOLDING COMPANY AND THE ASSOCIATION
As part of the Stock Offering, the charter and bylaws of the MHC, the Stock
Holding Company and the Association shall be revised as necessary in connection
with the Stock Offering. The proposed revised charter and bylaws of the Stock
Holding Company and the Association are attached hereto as Exhibits A and B,
respectively and made a part of this Plan.
VII. STOCK BENEFIT PLANS
The Board of Directors of the Association and/or the Stock Holding Company
intend to adopt one or more stock benefit plans for its Employees, Officers and
Directors, including an ESOP, stock award plans and stock option plans, which
will be authorized to purchase Common Stock and grant options for Common Stock.
However, only the Tax-Qualified Employee Plans will be permitted to purchase
Common Stock in the Stock Offering subject to the purchase priorities set forth
in this Plan. The Board of Directors of the Association intends to establish the
ESOP and authorize the ESOP and any other Tax-Qualified Employee Plans to
purchase in the aggregate up to 10% of the shares issued, excluding shares
issued to the MHC. The Association or the Stock Holding Company may make
scheduled discretionary contributions to one or more Tax-Qualified Employee
Plans to purchase Common Stock issued in the Stock Offering or to
18
purchase issued and outstanding shares of Common Stock or authorized but
unissued shares of Common Stock subsequent to the completion of the Stock
Offering, provided such contributions do not cause the Association to fail to
meet any of its regulatory capital requirements.
This Plan specifically authorizes the grant and issuance by the Stock
Holding Company of (i) awards of Common Stock after the Stock Offering pursuant
to one or more stock recognition and award plans (the "Recognition Plans") in an
amount equal to up to 4% of the number of shares of Common Stock issued in the
Stock Offering, (ii) options to purchase a number of shares of the Stock Holding
Company's Common Stock in an amount equal to up to 10% of the number of shares
of Common Stock issued in the Stock Offering and shares of Common Stock issuable
upon exercise of such options, and (iii) Common Stock to one or more
Tax-Qualified Employee Plans, including the ESOP, at the closing of the Stock
Offering or at any time thereafter, in an amount equal to up tp 8% of the share
issued, provided, however, that the aggregate amount of Common Stock acquired by
such Tax-Qualified Employee Plans shall not exceed 4.9% of the outstanding
shares of Common Stock of the Stock Holding Company at the close of the Stock
Offering or 4.9% of the stockholders' equity at the close of the Stock Offering.
In addition, the aggregate amount of Common Stock acquired by any Non-Tax
Qualified Employee Plan, Directors, Officers and their Associates may not exceed
4.9% of the outstanding shares of Common Stock of the Stock Holding Company or
4.9% of its stockholder's equity at the close of the Stock Offering, provided,
however, shares held by any Non-Tax Qualified Employee Plan or Tax-Qualified
Employee Plan available to such person shall not be counted. Shares awarded to
the Tax-Qualified Employee Plans or pursuant to the Recognition Plans, and
shares issued upon exercise of options may be authorized but unissued shares of
the Stock Holding Company's Common Stock, or shares of Common Stock purchased by
the Stock Holding Company or such plans in the open market. Any awards of Common
Stock under the Recognition Plans and the stock option plans will be subject to
prior stockholder approval. In addition to shares purchased by one or more
Tax-Qualified Employee Plans in this Stock Offering, any subsequent stock
offering, and/or from authorized but unissued shares or treasury shares of the
Stock Holding Company, this Plan specifically authorizes the Stock Holding
Company to grant awards under one or more stock benefit plans, including stock
recognition and award plans and stock option plans, in an amount up to 25% of
the number of shares of Common Stock held by persons other than the MHC.
VIII. SECURITIES REGISTRATION AND MARKET MAKING
Promptly following the Stock Offering, the Stock Holding Company will
register its stock with the SEC pursuant to the Exchange Act. In connection with
the registration, the Stock Holding Company will undertake not to deregister
such stock, without the approval of the OTS, for a period of three years
thereafter.
The Stock Holding Company shall use its best efforts to encourage and
assist two or more market makers to establish and maintain a market for its
common stock promptly following the completion of the Stock Offering. The Stock
Holding Company will also use its best efforts to cause its common stock to be
quoted on the Nasdaq System or to be listed on a national or regional securities
exchange.
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IX. STATUS OF DEPOSIT ACCOUNTS AND LOANS SUBSEQUENT TO STOCK OFFERING
Each Deposit Account holder shall retain, without payment, a withdrawable
Deposit Account or Accounts in the Association, equal in amount to the
withdrawable value of such account holder's Deposit Account or Accounts prior to
the Stock Offering. All Deposit Accounts will continue to be insured by the SAIF
up to the applicable limits of insurance coverage, and shall be subject to the
same terms and conditions as such Deposit Account in the Association at the time
of the Stock Offering. All loans shall retain the same status after the Stock
Offering as such loans had prior to the Stock Offering.
X. RESTRICTIONS ON ACQUISITION OF THE STOCK HOLDING COMPANY AND THE
ASSOCIATION
Regulations of the OTS limit acquisitions, and offers to acquire, direct or
indirect beneficial ownership of more than 10% of any class of an equity
security of the Association or the Stock Holding Company. In addition,
consistent with the regulations of the OTS, the charter of the Stock Holding
Company shall provide that for a period of five years following completion of
the Stock Offering: (i) no Person (i.e., no individual, group acting in concert,
corporation, partnership, association, joint stock company, trust, or
unincorporated organization or similar company, syndicate, or any other group
formed for the purpose of acquiring, holding or disposing of securities of an
insured institution) shall directly or indirectly offer to acquire or acquire
beneficial ownership of more than 10% of any class of the Association's Stock
Holding Company or the equity securities. Shares beneficially owned in violation
of this charter provision shall not be counted as shares entitled to vote and
shall not be voted by any Person or counted as voting shares in connection with
any matter submitted to the shareholders for a vote. This limitation shall not
apply to any offer to acquire or acquisition of beneficial ownership of more
than 10% of the common stock of the Stock Holding Company by a corporation whose
ownership is or will be substantially the same as the ownership of the Stock
Holding Company, provided that the offer or acquisition is made more than one
year following the date of completion of the Stock Offering; (ii) stockholders
shall not be permitted to cumulate their votes for elections of Directors; and
(iii) special meetings of the stockholders relating to changes in control or
amendment of the charter may only be called by the Board of Directors.
XI. AMENDMENT OR TERMINATION OF PLAN
If necessary or desirable, the Plan may be amended at any time prior to the
commencement of the Stock Offering by a two-thirds vote of the respective Boards
of Directors of the Stock Holding Company and the Association and at any time
thereafter by a two-thirds vote of the respective Boards of Directors of the
Stock Holding Company and the Association only with the concurrence of the OTS.
The Plan may be terminated by a two-thirds vote of the Association's and
the Stock Holding Company's Board of Directors at any time prior to the
completion of the Stock Offering, and at any time following completion of the
Stock Offering with the concurrence of the OTS. In its discretion, the Board of
Directors of the Association and the Stock Holding
20
Company may modify or terminate the Plan upon the order or with the approval of
the OTS. The Plan shall terminate if the sale of all shares of Stock Holding
Company Common Stock is not completed within 24 months of the date of the
commencement of the Stock Offering. A specific resolution approved by a majority
of the Board of Directors of the Association and the Stock Holding Company is
required in order for the Association and the Stock Holding Company to terminate
the Plan prior to the end of such 24-month period.
XII. EXPENSES OF THE STOCK OFFERING
The Stock Holding Company and the Association shall use their best efforts
to assure that expenses incurred by them in connection with the Stock Offering
shall be reasonable.
XIII. TAX RULING
Consummation of the Stock Offering is expressly conditioned upon prior
receipt of either a ruling of the United States Internal Revenue Service or an
opinion of tax counsel with respect to federal taxation, and either a ruling of
the Georgia or Florida taxation authorities or an opinion of tax counsel or
other tax advisor with respect to Georgia or Florida taxation, to the effect
that consummation of the transactions contemplated herein will not be taxable to
the Stock Holding Company or the Association.
XIV. EXTENSION OF CREDIT FOR PURCHASE OF STOCK
The Association may not knowingly loan funds or otherwise extend credit to
any Person to purchase shares of the Stock Holding Company Common Stock in the
Stock Offering.
XV. CONVERSION OF MHC TO STOCK FORM
Once the Stock Offering is completed, the MHC, if approved by the OTS, may
elect to convert to the stock form of ownership pursuant to federal law. As long
as required by federal law or regulation, any such conversion is also subject to
the approval of the Members of the MHC. The terms and conditions of such a
conversion cannot be determined at this time and there is no assurance when, if
ever, such a conversion will occur. If the conversion does not occur, the MHC
will always own a majority of the Common Stock of the Stock Holding Company.
If the MHC converts to stock form, either on a stand-alone basis or in the
context of a conversion-merger ("Conversion Transaction"), under federal law,
shares of stock issued in connection with the Conversion Transaction shall be
subject to subscription rights granted in accordance with OTS regulations. In
addition, pursuant to federal law and OTS regulations, in the Conversion
Transaction the shares of stock held by the stockholders of the Stock Holding
Company shall be exchanged for shares of the converted MHC in a proportion
established by independent appraisals of the MHC, the Stock Holding Company and
the Association. If, in a Conversion Transaction, the stockholders of the
Association or Stock Holding Company do not receive, for any reason, shares of
the converted MHC (or its successor) on such proportionate basis, the MHC (or
its successor) shall be obligated to purchase all shares not owned by it
21
simultaneously with the closing of such Conversion Transaction at the fair
market value of such shares, determined as if such shares had such exchange
rights, as determined by the independent appraisals. Moreover, in the event that
the MHC converts to stock form in a Conversion Transaction, any options or other
convertible securities held by any Officer, Director, or Employee of the Stock
Holding Company shall be convertible into shares of the converted MHC (or its
successor), provided, that any exchange ratio shall provide the holder of such
options or convertible securities with shares at least equal in value to those
exchanged; provided, further however, that if such shares cannot be so
converted, the holders of such options or other convertible securities shall be
entitled to receive cash payment for such options and other convertible
securities in an amount equal to the appraised value of the underlying
securities represented by such options or other convertible securities.
In any Conversion Transaction, stockholders of the Stock Holding Company
other than the MHC ("Minority Stockholders"), if any, will be entitled to
maintain the same percentage ownership interest in the Stock Holding Company
after the Conversion Transaction as their ownership interest in the Stock
Holding Company immediately prior to the Conversion Transaction, subject only to
certain adjustments (i.e., the transfer of assets held solely by the MHC to the
resulting stock company) that may be required by the OTS. These adjustments may
result in a decrease of ownership interest of the Minority Stockholders.
Each certificate representing shares of Common Stock shall bear a legend
giving appropriate notice of the provisions applicable to a Conversion
Transaction.
Attachments A-1 and A-2 Charter and Bylaws of the Stock Holding Company
Attachments B-1 and B-2 Charter and Bylaws of the Association
22